THREE MORE BANKS - STOCK TRADES HALTED - PLUNGING

[conditionzero]

The drop of first republic seems to be strongly linked to SVB collapse.

 

[Dumpstick]

Many of these banks invested heavily in Govt Binds, which at the time were paying 1.5-2%.

That seemed like a sweet deal, when interest rates were low, and they could pay passbook accounts .1%.

Then the Fed started raising rates, CDs went 4.5%, but these banks were trapped in the Govt bonds - couldn't (still can't) sell them.

Earning 2% and paying 4.5% doesn'last long...

 

[Chief Sapulpa]

What I don't fully understand is how the banks put themselves in this position. What, they didn't realize that when rates go up their bonds go down?

No high level economists available to them?

Government pressure to make risky loans to unqualified borrowers; 2008 all over again.

 

[mtnboomr]

Credit Unions rule!

 

[BallisticGuy]

Largely I think its because of interest rate increases as well as further talks of another hike. People arent borrowing as much as a result and the banks suffer. Also possibly alot of loans that defaulted because the borrower cant pay it. I think I heard mortgage foreclosures are way up also.
I could be wrong though.

It has to do with interest rates and bond maturity. The bonds that the banks purchase are not worth as much as they have on their balance sheets. When a mass bank run happens, they can’t cash out, and can’t give the depositors their money. When we deposit money into an account, bonds are purchased and added to the balance sheets. Same with loans, and when people are late, banks still pay. From what I’ve read, these smaller banks have unforeseen losses on bonds. Once it’s evident, it’s to late. That’s just based on how I understand it.

 

[trekrok]

From what I’ve read, these smaller banks have unforeseen losses on bonds. Once it’s evident, it’s to late. That’s just based on how I understand it.

This is the part I don't understand. It's pretty common knowledge that there is an inverse relationship between interest rates and bond values. When we were at record low interest rates (near zero), which way did they expect rates to go? Seems foreseeable that rates were going up. Especially when the fed is saying exactly that.

As a laymen I would not have been in longer term bonds in an historic low rate environment when there was a decent chance I'd need to sell them before maturity. So I don't get why the financial whizs would see it as a good idea.

 

[Rez Exelon]

This is the part I don't understand. It's pretty common knowledge that there is an inverse relationship between interest rates and bond values. When we were at record low interest rates (near zero), which way did they expect rates to go? Seems foreseeable that rates were going up. Especially when the fed is saying exactly that.

As a laymen I would not have been in longer term bonds in an historic low rate environment when there was a decent chance I'd need to sell them before maturity. So I don't get why the financial whizs would see it as a good idea.

Because we're commoners and aren't too big to fail so we have risk. They are playing with other people's money so it's still no risk, and in most cases, the banks (like corps) are going to get propped up anyways.

 

[chuter]

Greed, poor management, incompetence, laziness, in gov and bankers.
Just good ole human behavior. And the ones exhibiting this behavior don't have to suffer any consequences for it.

 

[SlugSlinger]

Reducing money supply from quantitative tightening and flight of deposits to higher earning interest bearing instruments.

Since I don't feel like tracking it down, could someone explain what the trigger is to cause these large banks to go under here lately?

 

[retrieverman]

I was in the local bank today, and I asked about mortgage rates because the loan on my OK house will be up for refinance at this time next year. The lady told me that their current rate on home mortgages is 8.5% and from what she’s been told is definitely going up.

I’m doing all I can to have my place paid off, so I don’t have to mess with all that.